Horizon Bancorp Inc: Form 10-Q for the period ended Jun 30, 2026

Forward–Looking Statements

This report contains certain forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Horizon Bancorp, Inc. (“Horizon” or the “Company”) and Horizon Bank (the “Bank”). Horizon intends such forward–looking statements to be covered by the safe harbor provisions for forward–looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. The forward–looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “could,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward–looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.

Actual results may differ materially, adversely or positively, from the expectations of the Company that are expressed or implied by any forward–looking statement. Risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward–looking statement include but are not limited to:

• effects on Horizon’s business resulting from new U.S. domestic or foreign governmental trade measures, including but not limited to tariffs, import and export controls, foreign exchange intervention accomplished to offset the effects of trade policy or in response to currency volatility, and other restrictions on free trade;
• uncertain conditions within the domestic and international macroeconomic environment, including trade policy, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets, and their impact on Horizon and its customers;
• current financial conditions within the banking industry;
• changes in the level and volatility of interest rates, spreads on earning assets and interest bearing liabilities, and interest rate sensitivity;
• the aggregate effects of elevated inflation levels in recent years, and continued inflation levels remaining above the Federal Reserve's 2% target;
• loss of key Horizon personnel;
• macroeconomic conditions and their impact on Horizon and its customers;
• the increasing use of Bitcoin and other crypto currencies and/or stable coin and the possible impact these alternative currencies may have on deposit disintermediation and income derived from payment systems;
• risks related to the development and use of artificial intelligence (AI);
• the effect of interest rates on net interest rate margin and their impact on mortgage loan volumes and the outflow of deposits;
• increases in disintermediation, as new technologies allow consumers to complete financial transactions without the assistance of banks;
• potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms (e.g., Apple Pay or Bitcoin) take a greater market share of the payment systems;
• estimates of fair value of certain of Horizon’s assets and liabilities;
• volatility and disruption in financial markets;

For the Three and Six months ended June 30, 2026 and 2025

• changes in prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;
• changes in sources of liquidity;
• potential risk of environmental liability related to lending and acquisition activities;
• changes in the competitive environment in Horizon’s market areas and among other financial service providers;
• legislation and/or regulation affecting the financial services industry as a whole, and Horizon and its subsidiaries in particular;
• changes in regulatory supervision and oversight, including monetary policy and capital requirements;
• changes in accounting policies or procedures as may be adopted and required by regulatory agencies;
• litigation, regulatory enforcement, tax, and legal compliance risk and costs, as applicable generally and specifically to the financial and fiduciary (generally and as an ESOP fiduciary) environment, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same;
• the effects and costs of governmental investigations or related actions by third parties;
• rapid technological developments and changes;
• the risks presented by cyber terrorism and data security breaches;
• the rising costs of effective cybersecurity;
• containing costs and expenses;
• the ability of the U.S. federal government to manage federal debt limits;
• the risks of expansion through mergers and acquisitions, including unexpected credit quality problems with acquired loans, difficulty integrating acquired operations and material differences in the actual financial results of such transactions compared with Horizon’s initial expectations, including the full realization of anticipated cost savings; and
• acts of terrorism, war and global conflicts, such as the Russia-Ukraine conflict and continued unrest in the Middle East, and the potential impact they may have on supply chains, the availability of commodities, commodity prices, and the overall U.S. and global financial markets.

The foregoing list of important factors is not exclusive, and you are cautioned not to place undue reliance on these forward–looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward–looking statements, whether written or oral, that may be made from time to time by us or on our behalf. For a detailed discussion of the risks and uncertainties that may cause our actual results or performance to differ materially from the results or performance expressed or implied by forward–looking statements, see “Risk Factors” in Item 1A of Part I of our 2025 Annual Report on Form 10–K, in Item 1A of Part II of this Quarterly Report on Form 10–Q, and in the subsequent reports we file with the SEC.

Critical Accounting Estimates

The Notes to the Consolidated Financial Statements included in Item 8 of the Company’s 2025 Annual Report on Form 10–K contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The Company considers these policies to be its critical accounting estimates. Management has identified as critical accounting estimates as the allowance for credit losses, income taxes, and valuation measurements.

For additional information regarding critical accounting estimates, see Note 1 – Nature of Operations and Summary of Significant Accounting Policies included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2025.

For the Three and Six months ended June 30, 2026 and 2025

Results of Operations

Net Income

Net Income increased $4.3 million, to $24.9 million, or $0.49 per diluted share, during the three months ended June 30, 2026 when compared to net income of $20.6 million, or $0.47 per diluted share, for the same period in 2025. The increase in net income when compared with the prior year period is the primary driven by an increase in net interest income of $8.1 million, a decrease in provision expense of $1.5 million and an increase in non-interest income of $1.1 million. The increase was partially offset by an increase in non-interest expense of $4.4 million, driven primarily by the $3.1 million legal charge in the current period, and an increase in tax expense of $2.1 million.

Net income increased $6.5 million to $51.1 million, or $1.00 per diluted share, during the six months ended June 30, 2026 when compared to $44.6 million, or $1.01 per share, for the same period in 2025. The increase from the year ago period was primarily a result of an increase in net interest income of $18.1 million and a decrease in provision expense of $2.5 million. The increase was partially offset by an increase in non-interest expense of $5.9 million, a decrease in non-interest income of $4.2 million and an increase in tax expense of $4.1 million.

Net Interest Income

Net interest income increased $8.1 million, or 14.7% during the three months ended June 30, 2026, to $63.5 million, when compared to the same period in 2025. While average earning assets decreased, owed to the balance sheet repositioning and deleveraging efforts in the third quarter of 2025, the reported net FTE interest margin1 increased by 114 basis points, to 4.37% for the three months ended June 30, 2026 compared to the prior year period, driven by the favorable mix shift toward higher-yielding average interest earning assets, and the funding mix toward lower cost deposit liabilities. Additionally, securities yields have expanded while deposit costs have declined when compared with the comparable year ago period.

Net interest income increased $18.1 million during the six months ended June 30, 2026, to $125.7 million when compared to the same period in 2025. While average earning asset balances decreased, owed to the balance sheet repositioning and deleveraging efforts in the third quarter of 2025, the reported net FTE interest margin1 increased by 119 basis points, to 4.33% for the six months ended June 30, 2026 when compared to the prior year period. The primary driver of the increase in net interest income compared with the prior year period is attributable to the favorable mix shift in both higher-yielding average interest earning assets, and the funding mix toward lower cost deposit liabilities. Additionally, loan and security yields have expanded while deposit costs have declined when compared with the comparable year ago period.

1Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.

For the Three and Six months ended June 30, 2026 and 2025

Following are the average balance sheets for the three months ended (dollars in thousands):

(Dollars in Thousands, Unaudited)

52

For the Three and Six months ended June 30, 2026 and 2025

Following are the average balance sheets for the six months ended (dollars in thousands):

(Dollars in Thousands, Unaudited)

The following table illustrates the impact of changes in the volume of interest earning assets and interest bearing liabilities and interest rates on net interest income for the periods indicated.

For the Three and Six months ended June 30, 2026 and 2025

Non-Interest Income

(Dollars in Thousands)

Total non-interest income increased $1.1 million, to net income of $12.0 million for the three months ended June 30, 2026 compared to the same period in 2025, and decreased $4.2 million for the six months ended June 30, 2026 compared to the same period in 2025. The primary components of the change were as follows:

For the Three and Six months ended June 30, 2026 and 2025

Service charges on deposit accounts increased by $0.2 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased $0.5 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily related to higher transaction-based fee activity in the current period.

Interchange fees increased $0.2 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased by $0.3 million for the six months ended June 30, 2026, as compared to the same periods in 2025. The increase was primarily driven by increases in merchant and debit card fees.

Fiduciary activities increased $0.2 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased $0.5 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily related to an increase in trust fees in the current period related to increased volume in estate planning and annuity sales.

Gain on sale of mortgage loans increased $0.4 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased $0.4 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily driven by the increased volume of sold loans.

Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $0.2 million for the three months ended June 30, 2026 compared to the same period in 2025 and decreased by $6.1 million for the six months ended June 30, 2026. The decrease was primarily related to the pre-tax gain of $7.0 million on the sale of the Company's mortgage warehouse business in the first quarter of 2025, which did not recur.

The remaining changes were nominal amongst the remaining individual non-interest income accounts.

Non-Interest Expense

(Dollars in Thousands)

Non-interest expense increased $4.4 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased $5.9 million for the six months ended June 30, 2026 compared to the same period in 2025. The primary components of the change were as follows:

Salaries and employee benefits expense increased by $1.5 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased $2.2 million for the six months ended June 30, 2026 compared to the same period

For the Three and Six months ended June 30, 2026 and 2025

in 2025. The increase is partially attributable to increased salary expense related to strategic hiring and annual merit increases, partially offset by a lower level of benefit expense compared with the year ago period.

Net occupancy expenses increased by $0.6 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased by $1.1 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily driven by increases in building maintenance expenses in the current period.

Data processing expense increased by $0.7 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased by $1.2 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily driven by increases in debit card processing activity and software maintenance.

Loan expense increased by $0.2 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased by $0.7 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is primarily related to a higher amount of production related expense in the current period and a higher amount of reimbursements in the year ago period.

Professional fees decreased by $0.8 million for the three months ended June 30, 2026 compared to the same period in 2025, and decreased by $0.7 million for the six months ended June 30, 2026 compared to the same period in 2025. The decrease is primarily related to a reimbursement of previously incurred legal fees and an overall reduction in gross expenses in the current period.

Outside services and consultants expense decreased by $0.7 million for the three months ended June 30, 2026 compared to the same period in 2025, and decreased $1.2 million for the six months ended June 30, 2026 compared to the same period in 2025. The decrease reflects management's ongoing efforts to reduce the reliance on third party services.

Other expenses, which includes corporate and other service expenses, increased by $3.6 million for the three months ended June 30, 2026 compared to the same period in 2025, and increased by $3.9 million for the six months ended June 30, 2026 compared to the same period in 2025. During the second quarter of 2026, the Company recorded a pre-tax expense accrual of $3.1 million related to a lawsuit stemming from 2018 related to a unique circumstance involving

the repossession and credit reporting of a single vehicle financed through our legacy indirect auto business, as previously announced. The accrual will remain in place until the Company has finalized the appeal process.

The remaining changes were nominal amongst the remaining individual non-interest expense accounts.

For the Three and Six months ended June 30, 2026 and 2025

Provision and Allowance for Credit Losses

Horizon assesses the adequacy of its Allowance for Credit Losses (“ACL”) by regularly reviewing the performance of its loan portfolio against various economic backdrops, which periodically change. During the three months ended June 30, 2026, the Company recorded a provision for credit losses on loans of $1.2 million. This compares to a provision for credit losses on loans of $2.0 million compared to the same period in 2025. The decrease in the provision for credit losses on loans compared to the prior-year period was primarily driven by a reduction in forecasted credit losses related to changes in economic assumptions, partially offset by increases in specific reserves on certain loans. The total provision for credit losses, including the reduction in reserve for unfunded lending commitments of $0.3 million in the current period, was $0.9 million for three months ended June 30, 2026, compared to a provision for credit losses of $2.5 million for the same period in 2025.

For the three months ended June 30, 2026, net loan charge-offs increased by $0.4 million to $0.6 million, compared to $0.3 million during the same period in 2025. The increase in charge-offs is due to modest increases in charge-offs in the commercial and consumer portfolios during the current period.

The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.05% at June 30, 2026, compared to 1.09% at June 30, 2025.

As of June 30, 2026, the liability for unfunded lending commitments was $1.3 million compared to $2.3 million as of June 30, 2025.

Income Taxes

The Company’s income tax expense for the three months ended June 30, 2026 was $5.8 million compared to $3.8 million for the same period in 2025, resulting in effective tax rates of 19.0% and 15.4% for those periods, respectively. The Company’s income tax expense for the six months ended June 30, 2026 was $12.0 million compared to $7.9 million for the same period in 2025, resulting in effective tax rates of 19.0% and 15.0%, respectively. The increase in the effective tax rate for three months ended June 30, 2026 was primarily due to expectations of higher pre-tax income in 2026 as compared to 2025, and less exposure to tax preferential assets in the investment portfolio.

For the Three and Six months ended June 30, 2026 and 2025

The effective income tax rates differed from the U.S. statutory federal income tax rates of 21% during the comparable periods primarily due to the effect of tax exempt income from securities, loans, and life insurance policies, and net tax benefits from tax credit investments.

Financial Condition

Total assets increased by $137.5 million, or 2.14%, as of June 30, 2026, from $6.4 billion as of December 31, 2025. The increase in total assets is primarily due to an increase in total cash and cash equivalents of $78.5 million, or 56.28%, and an increase in investment securities available-for-sale of $22.4 million, or 2.55%. The increase was partially offset by a decrease in FHLB stock of $38.3 million, or 83.77%, and a decrease in loans held for sale of $4.6 million, or 47.36%,

Total loans HFI, net of ACL, increased $82.0 million, to $4.9 billion, as of June 30, 2026 compared to balances as of December 31, 2025, due to growth in commercial loans that was partially offset by runoff within the consumer loan portfolio. The company continues to maintain a balanced growth profile across various geographies, products and industries, and holds a diverse lending portfolio consisting primarily of commercial real estate, consumer, residential and commercial and industrial portfolios.

Total investment securities increased $22.4 million, or 2.55%, to $897.8 million as of June 30, 2026 when compared to balances as of December 31, 2025. During the first six months of 2026, the Company purchased approximately $60.9 million of available for sale securities, which was offset by amortization and maturities within the portfolio and changes in market value.

Total deposit balances increased by $124.8 million, or 2.37%, to $5.4 billion as of June 30, 2026 when compared to balances as of December 31, 2025. The increase was driven by a $76.8 million increase in savings and money market deposits, reflecting continued success in core deposit gathering efforts, a $24.5 million increase in interest bearing deposits and a $21.6 million increase in non-interest bearing deposits. The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.

Total borrowings decreased by $25.6 million, or 10.30%, to $223.0 million as of June 30, 2026 when compared to balances as of December 31, 2025, related to a decrease in repurchase agreements.

Investment securities are comprised of the following as of (dollars in thousands):

Credit Quality

The ACL balance at June 30, 2026 was $51.9 million, or 1.05% of period-end loans HFI, compared to an ACL balance of $51.3 million at December 31, 2025, or 1.05% of loans HFI. The increase in the ACL is primarily due to net loan growth and an increase in specific reserves on select commercial loans.

For the Three and Six months ended June 30, 2026 and 2025

As of June 30, 2026, total non-accrual loans decreased by $0.2 million, or 0.48%, from December 31, 2025, to 0.65% of total loans HFI. Total non-performing assets increased $3.1 million, or 7.54%, from December 31, 2025, to 0.66% of total assets.

During the six months ended June 30, 2026, net charge-offs were $1.2 million, or 5 basis points annualized of average loans in the period, a change from $1.1 million, or 5 basis point annualized of average loans in the year ago comparable period.

For the Three and Six months ended June 30, 2026 and 2025

(Dollars in Thousands Except Ratios, Unaudited)

60

For the Three and Six months ended June 30, 2026 and 2025

Liquidity

The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the FHLB. At June 30, 2026, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.72 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.68 billion at December 31, 2025.

The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of $78.5 million during the six months ended June 30, 2026, as reported in the consolidated statements of cash flows. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $53.9 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $64.7 million mainly due to a net change in loans of $84.1 million and purchases of AFS securities of $60.9 million, which was partially offset by proceeds from maturities, calls and principal repayments of securities available for sale of $42.1 million and the redemption of FHLB stock of $38.3 million. Financing activities provided cash of $89.3 million, largely resulting from the proceeds from proceeds from borrowing of $156.2 million and the net change in deposits of $124.8 million, which was partially offset by the repayment of borrowings of $156.4 million, cash used in the net change in repurchase agreements of $19.2 million and $16.5 million in dividends paid on common stock, during the six months ended June 30, 2026.

Capital Resources

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at June 30, 2026. Stockholders’ equity totaled $726.2 million as of June 30, 2026, compared to $688.3 million as of December 31, 2025. The increase in stockholders’ equity during the period was due to an increase in retained earnings of $37.9 million for the six months ended June 30, 2026, and a decrease in accumulated other comprehensive loss of $2.0 million.

As of June 30, 2026, the ratio of total stockholders’ equity to total assets is 11.05%. Book value per common share was $14.21, increasing $0.71 compared to December 31, 2025.

Tangible common equity1 totaled $565.1 million at June 30, 2026, and the ratio of tangible common equity to tangible assets1 was 8.81% at June 30, 2026. Tangible book value, which excludes intangible assets from total equity, per common share1 was $11.06, increasing $0.74 compared to December 31, 2025.

Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended June 30, 2026 and $0.16 per share for the same period in 2025. The dividend payout ratio (dividends as a percent of basic earnings per share) was 32% and 31% for the six months ended June 30, 2026 and 2025, respectively. For additional information regarding dividends, see Horizon’s 2025 Annual Report on Form 10–K.

1 Non-GAAP financial metric. See Non-GAAP reconciliation included herein for the most directly comparable GAAP measure.

For the six months ended June 30, 2026 and 2025

Use of Non-GAAP Financial Measures

In addition to financial measures presented in accordance with GAAP, this document refers to non-GAAP financial measures, which Horizon believes are helpful to investors and provide a greater understanding of our business and financial results without the impact of items or events that may obscure trends in the Company’s underlying performance. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this document for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.

Non–GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin

(Dollars in Thousands, Unaudited)

62

For the six months ended June 30, 2026 and 2025

Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets

(Dollars in Thousands, Unaudited)

Non–GAAP Reconciliation of Tangible Book Value Per Share

(Dollars in Thousands, Unaudited)

63

Interest rate risk management focuses on monitoring and maintaining variances in the Company's net interest income profile due to changes in interest rates to within Board-approved policy limits. The Company primarily uses earnings simulation models to expose net interest income to 12- and 24- month sensitivities to various movements in rates. Simulations are modeled quarterly to include scenarios where market rates change instantaneously up or down in a parallel or non-parallel manner, which account for the periodic changes in the balance sheet composition. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2025 Annual Report on Form 10-K.

The table below shows the modelled effects of an immediate and parallel shift in interest rates on the Company's net interest income profile over a one-year horizon versus the base case net interest income in a flat rate scenario. The simulation model assumes a static balance sheet over that twelve month period, and utilizes various non-maturity interest bearing deposit beta assumptions, based on the underlying products, ranging from 12% to 80% in the disclosed model outputs below. Deposit beta is an estimate for how quickly interest-bearing deposit pricing will change for a given change in interest rates. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results, but rather to provide insight into our current interest rate exposure and to assist in the execution of appropriate asset/liability management strategies. As shown below, the model output would indicate that as of June 30, 2026, the Company's interest-earning assets are projected to reprice at a slightly faster pace than interest-bearing liabilities for the next 100 basis points change in interest rates.

(Dollars in thousands)

64

Evaluation of Disclosure Controls and Procedures

Based on an evaluation of disclosure controls and procedures as of June 30, 2026, Horizon’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Horizon’s disclosure controls (as defined in Exchange Act Rule 13a–15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on such evaluation, such officers have concluded that, as of the evaluation date, Horizon's disclosure controls and procedures are effective to ensure that the information required to be disclosed by Horizon in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time specified in Securities and Exchange Commission's rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosures.

Changes in Internal Control Over Financial Reporting

Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that during the fiscal quarter ended June 30, 2026, there have been no changes in Horizon’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Horizon’s internal control over financial reporting.

There have been no material changes from the factors previously disclosed under Item 1A of Horizon's Annual Report on Form 10–K for the fiscal year ended December 31, 2025.